On May 25, 1937 the first Arado Ar 196 V1 (WNr. 2589, D-IEHK) was test-flown, and so was the second prototype Arado Ar 196 V2 (WNr. 2590, D-IHQI) on June 18, 1937. Both prototypes had two floats, as opposed to Ar 196 V3 (WNr. 2591, D-ILRE) and Ar 196 V4 (WNr. 2592, D-OVMB) prototypes, which both had a large central float and two smaller outrigger floats mounted under the wings. All prototypes were powered by a BMW 132 D, 880 PS (PS=KM) take-off power, radial engine with a twin blade, adjustable pitch, metal propeller. The Ar 196 V1 differed from the remaining prototypes in the size and shape of the rudder, the outline of the elevator as well as the length and placement of the exhaust pipes. Ar 196 V1 had both exhaust pipes on the lower left side of the engine, while other prototypes had one on each side. The V3 and V4 prototypes differed from each other in shape and size of the outrigger floats and in placement of their struts. The fourth prototype was the first to be armed in a way the serial production planes were meant to be armed, with two 20 mm Rheinmetall-Borsig MG FF cannons with 60 rounds per gun, mounted in the wings; one synchronized 7.92 mm MG 17 machine gun with 500 rounds in the front right side of the fuselage, one 7.92 mm MG 15 machine gun in the back of the cockpit on a flexible mount and two 50 kg S.C. 50 bombs on ETC 50/VIII bomb racks mounted under the wings.The first test-flight demonstrated the need for corrections. The Ar 196 V1 and V2 had their rudder shape changed and its horn balance removed. The shape of the floats’ rudders was also modified.

In August 1937 the Aerodynamische Versuchsanstalt (Aerodynamic Experimental Station) in Göttingen conducted hydrodynamic characteristics tests of both types of floats. Simultaneously, the Erprobungsstelle (Testing Centre) in Travemünde tested all four prototypes. They confirmed, that the aerodynamic drag of both types was similar. The central float provided better stability during landing at rough sea conditions, as it transferred vibrations straight to fuselage, while twin floats transferred them to wings. On the other hand, smaller wing-tip floats would dig into bigger waves during take-off run, thus making it longer and more difficult. The large twin-floats arrangement, which as a result of the tests was lengthened by 800 mm, provided sufficient take-off and landing stability and at the same time facilitated high speed water manoeuvres.At the end of 1937 the Ar 196 V1 prototype was modified with intentions to beat the floatplane speed record. The plane received a BMW 132 K, 960 PS engine with a three blade, adjustable pitch metal propeller and the tail section of the canopy was closed. The Reich Aviation Ministry objected, as it wanted to keep the development of a new floatplane a secret, so the attempt was never made.To avoid delays in serial production the Technical Office of the State Ministry of Aviation ordered yet another, fifth prototype, Ar 196 V5 (WNr. 0090, D-IPDB) with a centreline float, for further tests. It was powered by BMW 132 K, 960 PS engine and a VDM three blade, adjustable pitch metal propeller. This prototype was completed in autumn of 1938.Signing of the contract for Ar 196 V5, was also accompanied by an order for 10 Arado Ar 196 A-0 planes with twin floats and serial numbers WNr. 0091 to 0100. The first Ar 196 A-0 serial production plane was completed on November 17, 1938 and the final one in January of the following year. These machines were powered by BMW 132 K, 960 PS radial engine with a VDM three blade metal propeller. They were armed with a single 7.92 mm MG 15 machine gun with 525 rounds on a flexible mount in the back of the cockpit and two 50 kg bombs on underwing racks.The forward section of the oval-shaped fuselage, based on a metal frame, was covered with duraluminium, while the remainder was covered with fabric. Metal structure of the wings was covered with duraluminium, only the moveable parts were covered with fabric. Floats divided into seven watertight compartments had a metal frame covered with aluminium. Each one was 7.25 m long at the capacity of 2750 litres. The planes were not equipped with catapult attachment points.In spring of 1937, after the series of tests with both the single centreline float and twin float prototypes, the Reich Aviation Ministry selected the twin floats version for serial production and ordered twenty Ar 196 A-1 planes. Their armament was identical to that of the Ar 196 A-0 version, but they were fully equipped for the ship catapult launching. These planes were to replace the run-down Heinkel He 60 aircraft stationed on board the Kriegsmarine’s heavy units.Another version was the Arado Ar 196 A-2, built mainly for the land-based units of the coastal air force (Küstenfligerstaffeln). The offensive armament of these planes was strengthened with addition of wing-mounted two 20 mm MG FF cannons and 7.92 MG 17 machine guns in the fuselage. The total weight of Ar 196 A-2 increased in comparison to A-1 version from 2955 kg to 3175 kg. By October 1940, 94 planes of this version were produced (some sources claim that the total number was 98).